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September 11, 2005
Two Annual Meetings, No Election - What To Do?...What to Do??
Here is an all too common question from a frustrated reader: "We have had 2 attempts to have elections - no quorum the 1st time and not even a quorum the 2nd time (less than 25%). I am under the impression that they have to make another attempt - for 25% participants to hold elections. Yet, I am told that the current Board will just appoint people to fill vacancies. I do not believe this is legal. Can you tell me which law pertains to it - and who is correct?"
Well, I cannot give out legal advice too freely, without being informed about a particular situation (and no, this is not an invitation for you to send me all of the particulars of your problem), but here is some general information that may help ease the frustration at least (translated: you are not alone!):
[Remember, I am speaking for California only] In order to determine what the possibilities are, a lawyer (hopefully) would first review the Association documents. It may be possible to hold an election by mail, and if so, the board is likely to get a better return than at a meeting. The Corporations Code generally allows for a written ballot for any action that could be taken at a meeting and an election would qualify (though it might not be appropriate in all cases), so long as the documents do not prohibit it. Some Boards would just appoint directors after two tries in this scenario, with or without legal advice. Sometimes holding meetings can be expensive and time consuming and boards want to move on to pressing business. If it is not a "contested election" (meaning there were not more nominees than positions open), most boards would probably just deem the nominees to be elected by acclimation. If there are more nominees than positions open, it is probably better to keep trying for a successful and legally valid meeting or election by mail. Without a contest, who is going to challenge the election? On the other hand, if there if a fight going on for the open board positions, a challenge is more likely. However, I can tell you that if there is a hotly contested election, one or more candidates will generally seek proxies from the members thus enhancing the chance for reaching a quorum of persons present (either in person or by proxy) at the meeting.
If a Board does appoint Directors without having a valid annual meeting or election, and if the process of appointment was challenged in court, a Judge would look at what happened, how the attempts to get the owners to send proxies were made, and what was fair and the most reasonable thing to do under the circumstances. The "election" naming the new directors is not automatically void under the law, although not technically valid either. However, if the Board made a laudible effort to get owners to come or send in their proxies, forcing another election still does not guarantee that a quorum would be present, and although a Judge certainly could order another election, a question arises as to whether the Judge has the power to alter the quorum requirement in the governing documents to something less than 25%. So the most reasonable choice may not be to schedule another election. I believe a Judge would have some choices here considering what is fair and resonable.
I know this sounds like a lawyer talking in circles, and it is, sort of, but the best I can do here is provide some general information because each situation is just a bit different and there are often unanticipated twists that come to light when reviewing processes. Besides, I am not fully informed about things that I would need to know if I were actually giving legal advice. In such a situation the board should really consult with a knowledgeable HOA lawyer to see what is the best thing for the association to do. All governing documents would have to be examined and all actions leading up to the election(s) would be considered before advice as to the best way to proceed should be given.
But be sure to keep in mind that this answer is for this year. There are brand new elections requirements beginning in 2006 and Associations must be aware of them because there are brand new penalties for failure to follow them. Stay tuned to my blog right here and you can also check out the CLAC website to get ongoing news about legislation.
Posted by Beth Grimm at September 11, 2005 3:34 PM